Airlines hunt credit tools to avoid crash

Back in 1997, the first indication of the private airline boom going bust was when they started defaulting on their payments. Circa 2008, the cash crunch in the sector is causing airlines to come up with new ways to keep the money rolling in the system to avoid defaults.
If airlines are to be believed, these instruments include those where shares of the company are put forward as a guarantee for debt.
SpiceJet's head of projects and planning, Kiran Koteshwar, said, "We are looking at various instruments which are available in the market. These include short term instruments, including simple overdrafts where shares are used as the guarantee. These are products which are available all over the world."
He added the Delhi-based firm was exploring the possibility of getting insurance for its debt.
An analyst with a foreign brokerage, who did not want to be named due to compliance issues, said, "Credit on forward sales has been an accepted practice in the industry. But putting the promoter's shares on the line is risky and would be slightly strange. People would give debt only when they feel value, which is not really there in the airline industry now."
16/06/08 Nirmal John/DNA MONEY/Sify

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Categories: Indian Aviation- In General Jun 2008